JSW Energy PAT down QoQ due to high coal prices

JSW Energy Ltd reported a sharp decline in its profit on a sequential basis due to a steep increase in fuel costs, but the company’s numbers were an improvement on a year-on-year basis.

The company’s profit before tax fell to just Rs 70 cr from Rs 417 cr in the preceding quarter due to lower sales and higher fuel costs.

On a sequential basis, sales fell to 1,993 cr from 2,049 cr, while fuel costs for the power producer jumped to 1,171 cr from 936 cr.

“The fuel cost for the quarter increased by 18% YoY to Rs 1,171 crore, primarily due to increase in international prices of coal,” JSW Energy said.

However, some of the increased expense was offset by a decline of Rs 50 cr in finance costs to Rs 341 cr. This decline was primarily due to interest rate reductions as well as prepayment, repayment and refinancing of borrowings, the company said.

Nevertheless, the company’s total expenses increased by Rs 186 cr to 1,989 cr on a sequential basis. This, together with a dip of Rs 139 cr in overall revenue, was enough to drag pretax profit down by Rs 347 cr.

However, some of the decline in pretax earnings was offset by lower tax costs during the quarter.

As a result, on a sequential basis, net profit fell by 250 cr to Rs 47 cr in Oct-Dec quarter.

However, on a year-on-year basis, the company was able to report an increase in net profit from Rs 21.4 cr. This was due to a an increase of Rs 126 cr in overall revenue and a decline of Rs 82 cr in finance costs.

Year on year, the company said, revenue was higher due to better merchant realisations and increase in other income.

The merchant sales during the quarter were 1,155 million units, up strongly from the level of 699MU in Q3FY17 due to the buoyant short term market, it added.

JSW had net debt of Rs 11,469 crore at the end of December, with Net Debt to Equity ratio of 1.04 times, compared to 1.29 times a year ago.

“Net debt effectively reduced by around 2,490 crore in 9MEY18 while average cost of debt sharply reduced from 10.17% in Q4FY17 to 9.04% in Q3FY18,” the company said.

The Board of JSWEL also approved capex budget for setting up additional 10MW solar power projects implying total solar power projects of around 17MW under implementation.

These projects consist of 4MW of floating type, 3MW of rooftop type and 10MW of ground mounted type. “Major equipment for the same has been already ordered,” it added.

The entire solar capacity is secured by long term power purchase agreements and is expected to be ready, in phases, by end of September 2018.

“We continue to make steady progress towards putting together the building blocks in respect of product & technology strategies; business partnerships and organisation structure for our EV business,” it added.

“The positive developments in the market environment and strong government push provide encouraging tailwinds to our efforts in this respect.”

It said Indian power demand growth picked up to 6.6% in Q3FY18 compared to 5.1% & 5.8% respectively in the previous two quarters.

On the supply side, thermal power capacity declined 490MW compared to the previous three months, on top of a decline of 1,126 MW in the second quarter. “Led by higher demand and supply side moderation, thermal plant load factor inched up from 59.3% in 9MFY17 to 59.9% in 9MFY18.”

It said the economic survey of the Indian government indicates that the worst is behind for the economy.

“The (economic) survey expects GDP growth rate to pick up to 7.0%-7.5% in FY19, up from an estimate of 6.75% for FY18 led by the structural policy reforms undertaken by the Govt. of India. The downside risks to India’s growth are trade protectionism, spike in crude oil prices and tighter global monetary conditions.

“We have seen green shoots in India’s industrial production growth which hit a 2year high of 8.4% in November 2017, but its inherent volatility entails a wait-and-watch approach.

“Nevertheless, the disruptive effects of introduction of GST in July 2017 seem to be waning. India’s manufacturing PMI has also seen an increasing trend post GST- after falling below 50 in mid 2017, PMI has rebounded touching a 5 year high of 55 in December 2017.”

It noted that the government has outlined a nearly 21% increase in funds for infrastructure in FY19.

“Over the next 3 to 5 years, we expect power demand to grow steadily considering the various macro-economic reforms and measures taken by the government..

“With limited capacity addition, which is likely to be significantly below targets, PLFs may firm up over the medium to long term.”

During the quarter Long term PPA (LTPPA) tie-up proportion moved up to 69.3% in Q3FY18, up from 64.6% in Q2FY18, driven by signing of 176MW agreement with Haryana discom.